1 eFX Daily colour

1.1 FX Spot

1.1.1 Overview

(Feb-24) Germany’s recent high-stakes election saw conservative opposition leader Friedrich Merz win comfortably, signaling a shift towards increased spending and ending an era of constrained fiscal policy. The euro rose by 0.7% in Asian trading following the election results.

In commodities, oil prices declined due to the prospect of increased supply from Iraq, while gold traded near last week’s all-time high, driven by weak economic data and rising inflation expectations.

  • Oil trades at $74.48 per barrel, and was down 2.91% last Friday.
  • Gold trades at $2939.50 per ounce, and was down 0.18% last Friday.

The rand faced some headwinds at the back on load-shedding announcement to stage 6, now at stage 4.

Against the crosses:

  • EURZAR trades at 19.2880.
  • GBPZAR trades at 23.2360.

Key events today:

  • Eurozone CPI, 12h00 SAST.

1.1.2 US

(Feb-19) President Donald Trump announced plans to impose 25% tariffs on automobile, semiconductor, and pharmaceutical imports, with an announcement expected by April 2. He aims to give companies time to establish US-based operations to avoid tariffs. These new levies could significantly impact industries and lead to higher consumer prices, particularly affecting countries like Mexico, South Korea, Malaysia, and Singapore.

(Feb-24) The Trump administration has taken several actions against China, increasing the risk of worsening ties. President Trump issued a memorandum to curb Chinese investment in strategic American sectors and urged Mexico to levy Chinese imports. The US also proposed fees on Chinese-made commercial ships. These moves led to a drop in Chinese shipping stocks and fluctuations in the CSI 300 Index, while the yuan rose 0.2% against the dollar, now trading at 7.2435.

1.1.3 SA

(Feb-17) The Rand remained stable at 18.32 against the $ after a volatile week, initially weakening due to the national budget postponement but recovering with rising global gold prices. The budget delay, caused by disagreements over a proposed VAT increase, is unprecedented and creates uncertainty ahead of the mid-March presentation. Markets are watching for debt consolidation and expenditure cuts in the revised budget.

Over the weekend, we saw a return of load-shedding to stage 6 but Eskom has announced a reduction to stage 4, effective from 00h30 on Monday, February 24th. This decision follows the successful return of most downed units, which has improved the power supply situation.

On the positive side: SA may be eligible to exit the FATF gray list in October, having addressed 20 of 22 items required for delisting. The National Treasury confirmed significant progress in improving the country’s financial security systems, with only two items remaining to be addressed. This progress has been acknowledged by the FATF, which will consider SA’s delisting in its upcoming October review.

1.1.3.1 eFX Volumes

  • Overall volumes

(Feb-19) Saw volumes picking to their highs at the back of the postponement of the budget speech.

(Feb-24) volumes fluctuated around the recent ADV last week, with an uptick on Wed (19-Feb) after budget was postponed to 12 March.

  • Price to volumes

(Feb-21) Rand looks set to trade 18.30 with the latest implied support at 18.05 and before that it was 18.25.

(Feb-24) Clients are happy to be short USDZAR below 18.50, otherwise they are long all the way to 18.85.

  • Liquidity hours across currency pairs
  • Currency positions

(Feb-20) Growing optimism on ZAR, in-fact both importer and exporters happy to trade at these lvls. Both dealing in big tickets.

(Feb-24) Rand opens slightly under pressure today.

1.1.3.2 USDZAR levels

(Feb-24) Clients are happy to be short USDZAR below 18.50, otherwise they are long all the way to 18.85.

  • ZAR facing negative sentiments after load-sheeding announcement
  • ZAR facing positive sentiments since may be eligible to exit the FATF gray list in October.
  • ZAR volume weighted price has reduced to 18.35.
  • Range for today 18.50 - 18.25. Thus, we remain rand positive.

1.1.3.3 USDZAR spreads

(Feb-20) The ZAR seems to now be benefit fitting from a weaker $ environment which is also coupled with Gold hitting all time highs and the confirmation by the President that there won’t we a fallout in the GNU following the budget issue.

(Feb-24) Rand held the 18.35 VWAP lvl and the 18.50 - 18.25 range. Importers are happy to trade at these lvls while exporters are staying on the side-lines.

1.1.4 Key events this week:

  • Eurozone CPI, Monday
  • US consumer confidence, Tuesday
  • Nvidia earnings, Wednesday [re Deepseek AI model re]
  • G-20 finance ministers and central bank governors meet in Cape Town though Feb. 27 Atlanta Fed President Raphael Bostic speaks, Wednesday Germany CPI, unemployment, Friday India GDP, Friday Japan Tokyo CPI, industrial production, retail sales, Friday US PCE inflation, income and spending, Friday Chicago Fed President Austan Goolsbee speaks, Friday

1.2 FX Volatility Update

1.2.1 Update

By Thuto Mukena - Institutional Sales Specialist (Feb-24)

  • Overview

Local vols ended Friday’s session lower, with the 1-week implied vol tenor down 1.34 vol pp from the open, as the 1-week volatility risk premium remained below its 1-week average. With key risk events in the rearview, market participants looked to wrap up the week on a quieter note.By Friday, the market had largely digested the postponed Budget, tempering vol expectations further. Meanwhile, the ZAR maintained upward momentum, closing the week firmer at R18.3269/$. Looking ahead, this week’s key local risk event is a sticky CPI, expected at 3.3% y/y, up from the prior 3.0% print.

  • G10 & EM

Peace talks remain in the headlines, with Ukrainian President Zelensky indicating he’d step down if Ukraine were admitted into NATO and peace was restored. The USD momentum remained bumpy but broadly lower, additionally the weaker S&P data dropping to a 17-month low of 49.7, which supported a further push lower in the greenback. This week’s focus shifts to U.S. GDP, where consensus remains steady at 2.3% y/y, with markets watching closely for any signs of economic softening. On the implied vol front, implied vols across G10 and EM traded cautiously amid the uncertainty on Friday, lacking a clear direction. USD/CAD and USD/CHF 1-week implied vols edged higher by 40bps and 35bps, respectively, while most other pairs saw vols offered. In the high-beta space, USD/MXN was the standout, with its 1-week tenor closing slightly higher, up 13bps from the open.

1.3 Africa

1.3.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Feb-24)

  • Egypt
    • Egypt’s Central Bank announced a EGP 30bio ($594 mio) industrial sector incentive to boost production and manufacturing in the country’s industrial sectors. The incentive offers financing at a 15% rate over 5 years.
  • Kenya
    • The East African country is set to get a $1.5bio loan from the UAE by next week to boost the country’s FX reserves and provide fiscal relief as the country aims to diversify its funding sources.
  • Morocco
    • Jan YoY CPI rose to 2.0%, the highest level in 12months.
  • Nigeria
    • A Nigerian court has ordered a seizure of cash and properties to the value of $4.7mio from former central bank governor Godwin Emefiele as it was determined these were proceeds of unlawful activity. The ex-central banker currently faces trial for corruption, fraud and other illegal practices.
  • Senegal
    • Moody’s cut Senegal’s long term foreign currency rating by two notches to B3 from B1 and outlook changed to negative on the back of the revised debt to GDP numbers published last week, where the country’s debt to GDP ratio was recalculated to 99.7% in 2023.
  • Eurobonds
    • Cash ETFs turned sellers once the US came in for what’s becoming the standard Friday afternoon weakness under a Trump Presidency. Some evidence of early month-end rebalances switching outperformers for underperforms as well.
    • ANGOL traded weak for the entire session despite already being cheap to peers, the roadshow and issuance headlines which hit on Thursday.
    • IVYCST had two-way for the most part, with the Thursday’s selling clearly forgotten. There were real money and retail buyers of risk across the curve, but offers into some of the bonds remained aggressive, with technicals at play.
    • KENINT flows were relatively quiet, but there were some two-way cares on-platform post the UAE funding headline. Curve closed up ~0.25pts.
    • NGERIA Opened +.75 on ETF buying, and didn’t flinch when an account was looking to swap it for ANGOL, and only really moved to the left once ETFs flipped to sellers later in the session. Overall, still the most resilient name in SSA.
    • SENEGL Opened +.25/+.75 with more post investor call relief rally, but it was for sale in the higher context, and quickly retreated closing -.10/+.375 , the 28s the ones closing lower.
    • SOAF closed-up 0.25-0.625pts. It was bid for most of the session on the back of RM and ETF buying, which was mostly in the long-end. Positive headline out this afternoon gave a tailwind to the bid: SOUTH AFRICA MAY BE ELIGIBLE TO EXIT FATF GRAY LIST IN OCTOBER; SOUTH AFRICA ADDRESSES 20 OF 22 ITEMS TO EXIT FATF GRAY LIST.

1.3.2 Economic data

Economic data releases